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Delayed GST payment: Interest to be charged on net tax liability from September 1

Delayed GST payment: Interest to be charged on net tax liability from September 1

The government has said that interest on delayed payment of goods and services tax (GST) will be charged on net tax liability with effect from September 1.

The industry had earlier this year raised concern over the directive of recovery of about Rs 46,000 crore of unpaid interest on delayed GST payment. The interest was charged on gross tax liability.

The GST Council, comprising centre and state finance ministers, in its 39th meeting in March had decided that interest for delay in payment of GST to be charged on net tax liability with effect from July 1, 2017, and law would be amended retrospectively.

However, the Central Board of Indirect Taxes and Customs (CBIC) on August 25, notified September 1, 2020, as the date from which interest would be charged on net tax liability.

Associates Senior Partner Rajat Mohan said this notification seems to be in disconnect with decisions of GST Council wherein it was assured to the taxpayers that the said benefit would be available retrospectively from July 1, 2017.

“Prospective availability of this benefit would mean that millions of taxpayers may be looking at demand of interest for over 3 years from the date of GST implementation. Businesses are expected to approach the High Courts again on this unjustified and illegal demand of interest basis the ‘principle of estoppel’,” Mohan said.

The CBIC had earlier said that GST law permits interest calculation on delayed GST payment on the basis of gross tax liability. This position has been upheld in the Telangana High Court’s decision dated April 18, 2019.

Net GST liability is arrived at after deducting input tax credit from gross GST liability.

Hence, calculating interest on gross GST liability increases the payout burden on businesses.

Tax Partner Abhishek Jain said with the GST Council having approved a retrospective amendment to interest being applicable on net liability, businesses would now await retrospective prescription for this.

“The retrospective notification becomes all the more imperative to subside multiple notices which were issued by the revenue authorities demanding GST on gross liability,” Jain added.

Businesses, other than those under the composition scheme and quarterly return filers, registered under goods and services tax (GST) have to file returns (GSTR-1) showing tax liability by 11th of following month and pay taxes by filing GSTR-3B between 20th-24th (due date varies according to the state in which businesses are registered).

There have been cases where GST assessees have paid taxes after due date but did not pay the interest due on account of delayed payment.

There were doubts on whether the interest was to be paid on gross tax liability or net tax liability. Interest at the rate of 18 per cent is levied on delayed tax payment.

Source: Economic-Times.

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GST authorities unearth racket involving Rs 140 cr tax fraud

GST authorities unearth racket involving Rs 140 cr tax fraud

GST authorities have unearthed a tax racket and arrested one person for allegedly defrauding the government to the tune of about Rs 140 crore through fraudulent means. The Central Board of Indirect Taxes and Customs (CBIC) in a release said that the Central GST Delhi North Commissionerate has unearthed a racket “involving supply of goods-less invoices and invoice-less goods”.

One person has been arrested in the connection and sent to judicial custody for 14 days.

The accused was found to be operating 10 fake firms which were created for rotation of money and fraudulent Input Tax Credit (ITC), thus defrauding the exchequer.

“Prima facie fraudulent ITC of about Rs 140 crore has been passed on using invoices involving an amount of Rs 1,040 crore,” it said.

Giving further details, it said the modus operandi of the accused, inter alia, involved obtaining GST registration of fake firms using documents of unsuspecting individuals and generating good-less invoices and e-way bills of these firms from a premise in Tilak Bazar, Delhi.

On preliminary scrutiny it appears that there is no nexus between inward and outward supplies of the errant firms, CBIC said.

Further, the fake firms have passed on fraudulent ITC to a range of buyers who have availed the same to discharge their GST liability on outward supplies, thus defrauding the exchequer.

Source: Economic-Times

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Bogus dealers used fake address for GST registration in Chandigarh

Bogus dealers used fake address for GST registration in Chandigarh

While the UT excise and taxation department unearthed input tax credit (ITC) scam worth over Rs 70 crore, the probe conducted by the department revealed that these bogus dealers used fake addresses for registration under goods and services tax (GST) in Chandigarh.

Meanwhile, the department has also cancelled GST registration number of five bogus dealers, who were earlier slapped a penalty of Rs 17 crore. The registration was cancelled with effect from the date of registration of these bogus firms. The list of other 15 was sent to the central excise department for action.

During probe, the department officials checked records of around 440 firms registered in Chandigarh, and it was found that 132 bogus firms were registered under GST in Chandigarh.

A senior official of the UT excise and taxation department said they have started checking of bills and other documents of those firms, who were issued invoices by five scrap dealers, against whom the department has decided to write to the UT police for registration of FIR. The firms who were issued invoices by five scrap dealers, are mainly operating from Industrial Area phases 1 and 2, he added.

The list of bogus dealers was prepared on the basis of reports received from other states. Deputy commissioner Mandip Singh Brar, who is also holding charge of excise and taxation commissioner, on July 26 had ordered a penalty of Rs 17 crore on the five dealers.

The investigation conducted by the UT excise and taxation department so far has revealed these 20 dealers, including five who were penalized, were not doing any sale and purchase in Chandigarh but dealing only in Haryana and other states. These dealers issued invoices to numerous firms/companies without actual supply of goods mentioned and facilitated illicit ITC entitlement.

A large number of people get involved in such a scam. The accused caused a loss to the exchequer by procuring invoices and undertaking fake purchases from non-existent firms and passing on fake ITC to various end-users who utilised it to offset their GST liabilities.

Source: Times-of-India.

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Telcos seek GST waiver on payments to govt, Rs 35K-cr input credit adjustment

Telcos seek GST waiver on payments to govt, Rs 35K-cr input credit adjustment

Telecom firms, barring Reliance Jio, have asked the government to waive GST on spectrum payments and other levies, while adjusting accumulated tax credits of Rs 35,000 crore in the pending payments.

In a letter to Telecom Minister Manoj Sinha Monday, the Cellular Operators Association of India (COAI) said value-added tax or goods and services tax (GST) is not applicable to government services internationally, as they are considered ‘out of scope’ or regarded as non-economic activities or sovereign functions that are outside the ambit of tax.

“Therefore, in line with the international practices, it is requested that payment of regulatory levies (licence fees (LF), spectrum usages charges (SUC), and spectrum payments) made by telecom operators should be exempted from tax under GST.

“The same could be achieved by issuing exemption notifications as per provisions stipulated under GST Act,” said COAI Director-General Rajan S Mathews in the letter.

COAI members include Bharti Airtel, Vodafone Idea and Reliance Jio. Mathews, however, said Reliance has a dissenting view in the matter.

He said that according to a report of the Telecom Regulatory Authority of India, the industry’s revenue reduced 32 per cent between April-June 2016 and April-June 2018, and it is expected that the revenue in 2018-19 will be lower than that of the revenue in 2013-14 at Rs 1.45 lakh crore.

“Since the industry’s revenues have declined substantially, the output GST on revenue is unable to absorb input GST credits available. Such a situation has led to blocking of approximately Rs 35,000 crore of operator’s capital in the form of excess GST credits,” Mathews said.

Telecom operators adjust input credit in GST that they collect from customers.

Mathews said levy of GST on a reverse-charge basis on both spectrum payout and LF, and SUC-related payments are leading to a cascading cash-flow impact requiring payment of GST, which cannot be set off against a corresponding GST liability.

“We request the government to facilitate greater utilisation of the accumulated GST input tax credit of telecom service providers as it will be of a big relief to the ailing industry… utilise the excess GST credit as payment towards the Telecom operators’ liability towards spectrum auction and licence fees/SUC,” Mathews said.


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Source: Money Control
160 companies to get notices on transitional GST credits

160 companies to get notices on transitional GST credits

Transitional GST credits

Several Indian companies, including some large entities, may start receiving notices from Monday on transitional tax credits in the run-up to the introduction of the single producer levy, two people with direct knowledge of the developments told ET.

The notices from the indirect-tax department follow last week’s direction from the Central Board of Excise and Customs (CBEC) that asked chief commissioners to verify all transitional credit claims beyond Rs 1 crore. About 160 companies, which collectively have claimed about Rs 65,000 crore in transitional tax credits, would be issued notices in the coming weeks.

“By Friday, chief commissioners had received the names of companies in their jurisdictions and asked for a basic report on the subject. Notices would be issued to companies and explanations would be sought for the amounts claimed in transitional credits,” said a person in the know.

In some cases, the indirect-tax department is also asking companies – particularly some Hyderabad-based infrastructure establishments — to produce the VAT returns of the past one year.
companies under GST Scanner


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The government is seeking these details to cross-check the transitional credit in GST. Transitional credits are basically tax credits accumulated before July 1 on pre-GST stock. According to the GST law, the credit can be set off against GST liability. Taxmen suspect that some companies are misusing the provision and have filed fake returns.

“The suspicion is that many companies have claimed credit when they do not have proper invoices to support them. Ideally, when this happens, companies could only claim 60% of transitional credit, but some companies seem to have taken 100% credits,” said a tax officer. Industry trackers say that this step by the government has spooked several companies.

“Large companies, with huge inventories, longer cycle time, and substantial monthly tax payments may rightfully have claimed significantly high transition credit,” said MS Mani, partner, Deloitte India. “Hence, all large claims should be evaluated after considering the size of the operations and attendant circumstances. There is an urgent need to define some processes based on which the transition credits are scrutinized, so that credits are not denied on frivolous grounds and unnecessary litigation is avoided.”

Individual companies under the lens could not be ascertained, but the tax officer quoted above said: “Most of these companies being scrutinised are major vendors of some of the biggest Indian companies. In most cases, the companies still have time to rectify their mistakes,” he said.

Some industry trackers say that Rs 65,000 crore as transitional credit in the total GST revenue of Rs 95,000 crore for July appears disproportionate.

“The amount of opening credit does look to be on the higher side, particularly because many companies have not yet filed the TRAN 1. In some cases, companies may have made genuine errors in credits. Many of these companies may revise in the coming weeks,” said Pratik Jain, Partner, National Leader – Indirect Tax – PwC India.

Experts said those scrutinising credits now time may be doing so prematurely as several companies are yet to file GST due to the extended deadline. “The deadline for filing Trans 1form is extended to October 3 and so the department will get final data only then,” said Sachin Menon, national head of indirect tax at KPMG.


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Source: ET